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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla. Opening bell market action. New.

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Us 37, New York 21, Europe 17, U.s. 15, Audi 15, Carl 11, Schultze 11, S&p 11, America 7, London 6, Bob 6, Sasha Cohen 6, Bob Pisani 6, Rick Santelli 5, Mr. Joyce 5, Thomas Joyce 5, Rodger 5, Minnesota 5, Hp 5, United Mileageplus Explorer Card 4,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl  
   Quintanilla. Opening bell market action. New.  

    August 6, 2012
    9:00 - 12:00pm EDT  

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october 3rd first debate. and october 5th next jobs number. those three dates will determine who the next president of the united states is. >> that was the answer that the whole campaign -- >> remember i took the white house on. >> i you know did. >> that's the answer. fair. make sure you join us tomorrow. "squawk on the street" is next. ♪ good morning. welcome to "squawk on the street." i'm carl quintanilla with melissa lee and david faber. jim cramer is off. we're not getting a lot of data this week but a lot of breaking news in the past hour which we'll tell you all about. there's a look at futures. implied opening 23 points. europe as well. not only is the spanish two year down to 2.35 it was at 7 not too
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long. a trading glitch on the ibex has halted trading this morning. something global markets are becoming familiar with. >> no clarity on what the glitch is. a story we're keeping on top of. let's kick off our road map. a load of breaking news. founder of best buy offering to take the struggling retailer private for $24 to $26 a share. will it happen and what does he see that short sellers do not. >> knight capital gets that lifeline but crushes the common. 70% dilution even with it. can knight survive as an ongoing entity? >> it may not feel like it but the dow is just 180 points from its high for the year. four straight weeks. what's needed to help keep the summer vibe alive. >> breaking news, best bitrading sharply higher on news the company's founder has submit ad proposal to the board to accare the company for $24 to $26 a
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share. david faber had the news a few moms ago. raises a whole host of questions about what needs to happen at this company, whether or not public ownership is reasonable for these big box retailers right now. >> if it's real, it's a significant premium for a company that has no shortage of challenges. the question of course is how real is it? let's go through where we are on that because that's the important part. we have been hearing that mr. schulze has been considering a bid or a sale of his ownership stake. owns exactly 20.1% of the equity of this company. roughly a billion dollars worth of stock. he would roll that into this bid. he's also looking and this is my own reporting to raise as much as $7 billion in debt financing. credit suisse has given him a highly confident letter and said it can raise that 7 billion and would need an addition aal $2
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billion in equity. he's saying he's not reached any agreements. he cannot name them or at least divulge his so-called group because of the workings of minnesota takeover law it goes back to the days of dayton hudson and the halves and four year holding periods. gets complex. he's coming forward in the way he has and claiming he can't name who these private equity firms are. >> so because he's bound by minnesota law not to disclose what the group is -- >> until he gets permission. >> why would you say it may or may not be real? >> i would like to know who the private equity firms are. i would like to know they are committed to providing that equity. $2 billion is enormous amount of money. it's about $8.6 billion for equity and debt needs to be refinanced. huge number in this market for a company whose growth trajectory as you know better than i --
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it's not growth. it's not what you want. and, you you know, wonder when a private equity firm gets involved they think about an exit. what's an exit strategy for owning best buy. take it back to the public markets after you fix it. how many years will that take. private equity firms are shig away from club deals where two or more firms would contribute the equity because some of them have the same limited partners who are wait a second now i have more exposure to best buy. >> a much bigger financial stake taken on by private equity firms since they are reluctant to share the burden. >> there's a lot of questions here but listen he's come forward with this. he's a 1b filer. he was obligated to do so publicly obligated to disclose. we haven't heard from best buy but expect to get some sort of a statement from best buy. most likely they will say we'll wait and get back to you in
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terms of what our response will be to this proposal. >> at 21.97, believe this or not -- >> yes it does. it think there's a chance here. this is a guy, he was still chairman as of the spring. >> surrendered his position in order to exercise his options and create that 21% stake. >> i think the key question, carl, what's his strategy going to be? he mentions other members of former management who might join him including brett anderson, alan linzmyer. what will they that they weren't doing long ago when they were running the company? i don't know. but it would seem you do need to rethink the business model in some way for a company like this. maybe not. the market is giving it some credibility. a billion dollars worth of stock is not? -- is not instant. credit suisse has the wherewithal to raise $7 billion in debt financing but still a big number in this market
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overall. we've not seen an lbl this size for a company that's declining. >> also illustrates the frustration of a lot of shorts who are in a lot of names that look doomed. we can name a few. but the idea that somebody swoops in and makes a bid, a private bid even has got a lot of the shorts on their heels especially on this name today. >> good point you raise because i'm sure a lot of guys are saying i'll cover the short. although they may put it out again. guys may be putting it out now saying well i don't know. if this -- 24-26 is as high as he can go. he doesn't have it in writing from any firms at this point that he's raised the money. all it is at this point is nonfunded proposal from a credible guy. >> who knows the company although still needs to do due diligence. >> on wall street prior to this there were a lot of notes being
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put out about whether or not schultze was serious. bbt came out a sponsor would have to put out at least $30 a share. that's underneath that expected price to convince the board to do the deal. so we'll see if it's realistic. >> listen. they still don't have a permanent ceo. correct? >> right. >> this is a board that's been in some turmoil. let's move on to another one of our big stories. knight capital reached an agreement with investors given a $400 million lifeline pap software glitch caused errant trading in many stocks. the investment will come through tissue of what will be very soon, 267 million shares of common through a preferred offering, four firms taking the bulk of it. $1.50 a share conversion price. we reported this yesterday about
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5:30 or so. many people did not anticipate it would come at that discount. but, in fact, it succeed in keeping this firm alive. capital depleted. still had capital but not a lot of people willing to trade. very much uncertain whether knight could open for business this morning. from what i heard having spoken to people close to the situation, potential buyers of the overall firm felt they needed more time and time was something knight did not have going the route of massive dilution. but book value will be well above where they are able to convert their shares. >> we do want to bring in bob pisani who is live on the knight trading floor. we expect to hear at some point from tom joyce later on. >> just saw him a few moments ago. anticipate he'll be out shortly. he's on crutches. he had knee surgery literally the day before this happened so you can imagine it's been a very tough week for him.
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talked to a number of traders on the floor, beautiful trading floor behind me here in jersey city, new jersey. tremendous amount of relief. david very accurately depicted the concern here on friday was that there was a probability, a fairly good probability this firm would be broken up and sold for its parts the most valuable of which was that market making operation. that's not going to happen. on the other hand, they got a slew of new investors that now own 75% of the company. >> bob, i think also the question is of the customers that started routing trades away from knight is this enough to let them get the software glitch and believe knight has it under control. >> what impressed me on friday afternoon when we came on and reported that scott trade was routing orders back here. ameritrade was doing it. vanguard has not made that announcement. i'm waiting for an update on that and maybe tommy can inform us more on that. they came back fairly quickly. another thing that impressed me
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the amount of people who are ultimately interested in acquiring a piece of this economy. i hope tommy will flush that out a little bit more. and who other potential bidders or who may or may not have stayed in the game. >> interesting as well, sort of a technical note, they could not, i would ask why not do a straight common offering but they would have need a shareholder vote and that would have, more than 19-9, taken quite sometime. this way they get the money right away and in ten business days those that receive this convertible will continue university given where it is. 2% coupon is an after thought. that's the reason it was structured as it was to avoid a shareholder vote because they needed this money right away. >> look, it's a tough situation. i think people down here feel the firm has been saved and far and away that was the single most important thing. i was here thursday afternoon, some places around here, restaurants in the neighborhood and a lot of people were
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concerned they wouldn't have a job on monday morning. they got it. bad news the firm has paid a heavy price for that. >> you can arguably say it's a shell of its former self. they had 20% of apple in terms of market making prior tore all of this. 2% on friday. bob, there are still some analysts who say it's unclear whether investors will value this as an ongoing entity even with this deal. >> look. this market making operation probably 50% of their revenues, extremely value scrabble. what's it worth to do a tremendous amount of business to do with scott trade and ameritrade and vanguard. not a lot of people can handle that infrastructure to support that. they have other kind of operations that were as well, they got a high frequency or high-speed trading operation. there's parts that are very valuable. the good news is here holding the firm together. what i want to hear from tommy is the post mortem.
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what will the firm be doing to look at the mistake that was made and how will they prevent it from happening between. broader issues i want to talk to him about restoring trust and confidence in investors in general. >> there's also a question as to what knight capital will look like. will they have a job tomorrow? what sort of spending plans are there for research and development. will they have the flexibility to spend that sort of money with these investors involved at this point? >> they will have a whole bunch of new investors that are obviously very interested in how this business operates. these people who invest are part of the whole business. they themselves under try-- intricately involved. the good news is you got a lot of professionals floating around who want to try to figure out how to make this a lot better. i'm interested in post mortem and how he's looking at making sure he's restoring confidence.
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not just in knight but the overall system. the industry has got to woman together with tighter standards. the s.e.c. is standing on top of them. but the industry as a whole not just knight has got to get together with the little bit -- with tighter standards. the question is how do you get there from a to b right now. >> bob, look forward to hearing from joyce later on this morning. when we come back how do you place best buy after the news that the company's founder wants to buy it. we'll find out what the analysts are saying about the stock and if now is the time to get in. take a look at futures. dow is only 183 points from the high for the year. friday's gains the third best percentage gain the year as well. a lot more "squawk on the street" live from post-9:00 in just a minute. plus, in-branch seminars at over 500 locations,
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richard schultze wants his company back even though some see the big box brick and mortar business becoming a dying breed. what does best buy founder see in the company that shoppers and short sellers do not. tweet us at cnc"squawk on the street." we've seen value investors
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believing there's stral. david einhorn had been in best buy, dumped the shares during the second quarter. we don't know at what price he got in. to see it pop and miss. he threw in the towel. said he didn't have any confidence in the company's prospects. >> a lot of discussion this morning about what you would need to do, what kind of medicine you would have to take and what would happen to margins -- they would have to be taken to a level where the public markets would have no to less rans for. >> can you cut prices to a point to generate volume but still pay the overhead, the staff, the new genius bar type people, the rent. that's a big question. >> we should mention even though we're not getting a lot of data, big week for ipos. biggest week since facebook. manchester united. >> the restaurant world. parent of outback stake. >> cke. >> exactly. so restaurants and sports. >> yeah.
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figure that. coming up going from the ice to the street, olympic silver medalist and figure champion sasha cohen in how she's looking to strike gold in the business world. pretty quiet this morning. a lot of breaking news. we're looking at five points on the s&p. much more ahead on "squawk on the street." we'll be back in just a moment. then, the united club. my mother was so wrong about you. next, we get priority boarding on our flight i booked with miles. all because of the card. and me. okay, what's the plan? plan? mm-hmm. we're on vacation. this is no plan. really? [ male announcer ] the united mileageplus explorer card. the mileage card with special perks on united. get it and you're in.
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. in case you missed it right there, talking to representative from knight which we continue to watch closely.
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nine minutes before the bell want to bring in director of floor operations for ubs. as you point out friday was about europe and euro. one month high. spanish short term debt yields coming way down, continue to come down. is that the dominant dynamic today? >> i suspect it will. you have to give mario draghi great compliment. he kind of pulled a david copperfield. while everybody was looking at the broken arm that spain had he started to talk about how strong their legs were. he took everybody's focus from the ten year and put it on two year. by doing that he bought them a lot of time. why i say it's about the euro, there's on enormous short position in the euro. that's benedict dating things. recall how frequently people came in to talk about parity. the euro will go down equal to the dollar. so i think you got a lot of public people who never played
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currencies got picked off base and that's this huge sweep over the last couple of days. >> somebody wrote this morning that draghi and bernanke have been playing in their words near perfect poker in their ability to extend the expiration of that put without having to actually resort to their canon. >> there's no question about it. bernanke is in great shape. we discussed the fact when everybody was talking about the imminence of qe3 and i said no, no, i think he'll try to pull a justice roberts and wait until september and that looks what he's trying to do. and draghi, he is playing a bit of a magician over there. pretty good. >> art we got to ask you about was going on at knight. knight has a lichb feline. built there's reports of a conversation going on getting at the mario shapiro said we're not cancelling the trades. is that the right thing to do?
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is that what investors need to know that the s.e.c. is going to let these firms live and die by their own sword? >> they talk about generals fighting the last war and i was not privy toni of those conversations. but there is a general feel on the floor that the s.e.c. might have been a little shy in the fact that after the flash crash they were accused of being too accommodating so they may if those conversations took place have decided they wanted to play a little bit more of a tough cop. as we found out with lehman you have to be very careful what the repercussions are when you play tough cop. >> sounds like you question what the decision was. >> i don't know. i would have to know more about the conversation. but what i'm saying is that i don't think anybody in this industry at this time really wants to just slam their fist down and say no that's the way thing are. i think we've learned, you're going to have to interpret each
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situation separately, and because they are all different and you have to be careful. >> art, thanks a lot. meantime can the bulls build upon friday's rally. get ready for the opening bell. it's coming up here next on "squawk on the street." this man is about to be the millionth customer.
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welcome back. getting ready for the opening bell. you're watching cnbc "squawk on the street" live from the financial capital of the world. if we close lower today monday on the dow that is ten straight mondays lower. >> yeah. >> we have not done a stretch like that since 1973. >> that's amazing. >> buying on mondays lately has been treacherous. >> the mets made to it the seventh game of the world series that year. >> it was a goodyear. we don't pay close attention to knight capital, thomas joyce is expected to join bob pisani in the very near future. had a knee surgery a couple of days ago. >> had knee surgery the day before the glitch happened. that's what we're waiting for. th's why we're waiting for
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thomas joyce here at the open. >> the converted price is above 50, tangible book value at the firm is closer to where that 2.80 number or $3. they didn't lose all their capital and they are adding 400 million in capital. so, the capital position of the company is fairly electronic at least when it comes back to tangible book value how the market will choose to either discount that or treat that remains unclear. >> the other big story aside from knight is best buy and i wonder, david, if any more col is per could late as we continue. >> i was on the phone. it appears that schultze was motivated in part because they claim at least from what i'm hearing the board was stalling. they approached them three weeks ago saying give us your permission to allow us to form a group. a lot of this goes back to minnesota take over law which was formed in the wake, trying to acquire dayton hudson, the retailer. somewhat complex.
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schultze came and said we want this. they waited three weeks. then they told him most recently it would take another three weeks, perhaps after the company reports earnings, that's after august 21st. we'll see what those earnings look like. they decided to come with the offer right now to put public pressure on the company to respond simply to allow them to form a group. the company does not need to say we're in favor of your deal or i want to work with you, they just need allow them to form a group and schultze then has the opportunity to say who the other potential investors are and move from there because of course the market will have some doubts and uncertainty about the real seriousness of those investors until we get them by name and know they are there. >> check out shares of radioshack, another troubled retailer. that stock seeing a bid that if best buy can have deal maker come in and look at it at least maybe radioshack can as well. it's higher at the open.
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>> after friday's big rally, of course, 217 points. makes it four straight weeks to the upside for the dow. there's the opening bell. the s&p 500 at cnbc real-time exchange. this morning at the big board, atf managed by morgan trust celebrating its one year listing anniversary. at the nasdaq, dell frisco -- i'm biassed. >> had a couple of rib eyes in the past. >> one near "rock center." >> knight and best buy are the two big stories. no upgrade for walmart. doing a few surveys that show an increase in the number of shoppers who say they go at least once a week and a decrease in the number of shoppers who say they don't shop there at
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all. they see it as fiscal cliff resistant with gas prices going up. >> increase in the terms of the number of people going on a more frequent basis. that's because of the grocery business has expand sochd. you go more frequently when you buy food. it's a big week for retailers. macy's and jc penney's report earnings. the revenue gap between the two will don't widen as macy's continues to gain share from jc penny. we had a number of developments in terms of pricing strategy. ron johnson just spoke to courtney regan discussing the plan. but those are two big ones we'll be watching this week, macy has a nice run until the month of may and then a little false terrify there in terms of stock performance. >> do you want to send it over to bob pisani who is live on the knight trading floor with knight ceo thomas joyce. >> we are indeed, this beautiful trading floor in jersey city.
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tom joyce is with us. you kept the firm together. a lot of people thought you might have to sell the firm piecemeal. you have a lot of new investors that effectively own 70% of the company. your confident this is the best deal you could make under the circumstances? >> absolutely, bob. you know, the flattering thing is how the industry responded to us. the wildly flattering thing is how our clients responded to us because a lot of the incoming phone calls came from our clients when we were under stress last week. over the course of the weekend between clients and other interested parties we heard from a lot of people, again, very flattering. and we brought to our board a few ideas, we wunnowed down the best ideas. we had many discussion. i feel very confident and the board feels confident we made the right choice for this firm. >> flush this out more for us. you had over 90 people calling you in the course of the last
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three days making offers of one kind or another. can you confirm that. flush it out more. who was interested, who dropped out? >> sure. i will confirm it was a big number. >> 90? >> yeah. in the neighborhood. in the neighborhood. it was a big number. and it was all types of people. it ran spectrum from private equity investors to of course clients who showed up to some stress investors, just some strategic investors who saw some assets that might be interesting. we had tons of inquiry across a wide spectrum of ideas. i'm confident we sat on the best inclusion for our company. >> a compliment certainly to your ability and how you built this firm that you got 90 investors, 90 people interested. on the other hand what do you say to the old investors who lost a lot of money including big organization. what do you say to those old investors?
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>> clearly we're not happy with how it all played out. we take a lot of pride in how we treat our clients. it was a very big mistake that occurred wednesday morning. the most important thing is we got our clients out of the way. we made the mistake, the mistake hit us. fortunately we were capitalized enough to hand tell mistake. we revamped the capital struck purr. we're in better financial shape than we were a week ago. the most important thing we were looking out for our clients in a moment of stress. there was a problem. we took the consequences. none of our clients. the industry didn't suffer. >> can you briefly flush out a little bit more what exactly happened. i know you talked about some difficulty interfacing with a program at the new york stock exchange. was that it? >> there wasn't any more to it. sadly a simple break down, a large break down but a simple break down. an issue with trading technology. you can be sure right now we're doing an internal investigation to identify what truly happened.
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we can source then the facts behind it. you probably are not going to be surprised to learn that since that large mistake wednesday morning we've been focused on a couple of other things rather than simply a post mortem. we'll be in the post mortem quickly and come out with solution us as to how we can enhance the system and environment. sni >> independently of the prop itself, what took so long to turn the thing off. 9:31, people were saying things are wrong. 9:35 people were yelling at each other. this ran for half an hour essentially. what took so long to turn it off? >> well, again, we're going to start -- we've started the investigation. we'll know more as we go along. the most important thing to me is we get our clients out of the way. there's nothing about this error that makes us very happy. but the one piece of pride we
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can take in that is that we it to us, our problem, our suffering clients immunized against any issues >> you're doing an internal investigation. do we need more regulation, more systemwide standards do, we need, for example, we have price based circuit breakers. do we need volume base circuit breakers that says if knight says 1,000 trades a second and then goes 25,000 the system should shut down or go slow? do you need develop that or does the industry or the s.e.c. what needs to happen? >> there certainly should be a lot of attention focused on how we can enhance the technology. what we need to remember is that the s.e.c.'s job, the regulators job and this is hard for me to say this, the regulators job is not to save knight capital group. the s.e.c.'s job is to make sure there's no systemic risk to the industry. and you know what?
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they did their job. now you can argue that it might have been a little better this way or that way but after the flash crash of may in 2010 they put in things like circuit breakers. they changed the way you handle short sales and naked access. s.e.c.'s job is to prevent a systemic risk to the capital markets. they did their job. >> would you support additional rules? what something does need to be done to tighten up the technology in some way. would you support additional rules that volume based rules transactions? >> i'll support additional rules once we have the data around which to craft additional rules and we'll have a lot more data once our investigation is complete. >> let me move on. there's a story in the "wall street journal" that you spoke with mary shah pi roand the new york stock exchange asking them to cancel additional trades, six stocks that were already declared clearly erroneous.
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can you flush that out for us confirm you spoke to her and what did you say to her? >> we don't often regale others with conversations we have with our regulators. i'll confirm we were in discussions with the s.e.c. i spoke with chairman shapiro. we had a frank discussion. and she did what she thought was right for the industry. and i have to applaud her for her decision. i'm kind of biassed. i wish she made a different decision but she thinks she made the right decision for the industry and i have to support her in that. >> after the flash crash the s.e.c. tightened the rules for defining what was clearly erroneous. do you think an exception should be made in your case. the nyse kept by what they thought was the rules. >> there was an error by any definition this was an error. so we would have liked to see more flexibility in how they
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responded to the error. but i appreciate their response and i have to respect them for it. >> now, we know scott trade and ameritrade are routing orders back to your organization. what about the rest, have you heard from vanguard. is everybody back on board or where are we on that process? >> markets just opened. so i can't tell you exactly who is writing to whom right now but we've had an unbelievable outpouring of support from our clients. but i have every confidence over the next several days our client base will respond with order flow like they respond with support late last week. >> the stock false terrified right now, is that correct? >> they false terrified a little bit after 9:00 for news pending. i think this was the news that was pending. >> let's talk about, before we let gourks there's already calls for a congressional investigation. have you had calls from congress, have you had any interactions with congress. >> no interaction with congress.
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this is an isolated situation. we screwed up. we paid the price. i'm not going to speak for our congress people but i wouldn't know why you need a congressional investigation into this. it's straightforward. we made an error and paid the price. >> you're one of the most respected men on wall street. i've known you almost 15 years and everybody, everybody has something positive to say about you. but you took your reputation took a hit here. how do you feel personally about your reputation and what, if anything, beyond what you're doing now are you going to do to make sure that brand name tommy joyce is still the top quality name that people always associate with that. >> you're very flattering. thank you. i think reputation is crafted over a period of time and reputations are established by one's actions. so, i guess the actions we have taken and actions we will take in the future will determine
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whether people have a high or low opinion of me. i can tell you this, we're going to do our best to restore knight to what it was. our financial footing is better than it was. as far as i'm concerned it's business as usual at knight capital group. >> melissa lee has a question for you. melissa, go ahead. >> tom thanks for coming on "squawk on the street." you had mentioned the flash crash as one of the examples of technical glitches. the facebook ipo is another. and you came out swinging on this very program of blaming the nasdaq. you said first of all i want to point out this wasn't in any way shape or form an industry failure. the failure was nasdaq's. it was nasdaq's failure. now that you're on the other side of this were you being too harsh. give us your thoughts. that's the first thing. we heard about the glitch. remember back to when you were here on this set, pointing a finger at the nasdaq. >> well, i would like to just put it in perspective. we screwed up last wednesday. knight capital group screwed up
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last wednesday. and knight capital group paid the price. nasdaq screwed up on that friday and the industry paid the price. so i think it's different. i'm not proud of what happened last wednesday by any stretch but i'm proud of our response and how we discussed it, how we communicated and how we prote protected our clients. >> mr. joyce, david faber, what do you tell shareholders at this point. some say wait a minute you just sold control of the company for $1.50 a share and we didn't get a chance to vote or any other voice in this. how do you explain this transaction to them when they look at it saying you massively diluted us and we didn't have a voice in anything happening here. >> the only reason there was a lack of an opportunity to get to our shareholders to give them a voice is because the company was under great stress and the new york stock exchange has rules that deal exactly with the
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situation when companies are under great stress. when he the best advisors. i have to tell you when it comes to investment banking there can't be two better firms out there than jeffries and sandler. they stood up with us. they were here with us every step of the way. they gave us great advice and the board great advice. we recapitalized the company in a moment of stress. another thing you might want to point out, david, is wednesday, thursday and friday i think we traded something like 600 million shares of stock over that period of time. for a company that had about 90% of its share holdings in institutional hands. that was a massive turnover. so at this point i'm kind of curious what our shareholder base looks like given all the turnover. >> that's a very good point. yeah. good point. >> tommy, we have to let you go.
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before we let you know how are the knees doing. this man had knee surgery the day before. came in here on crutches. how are you feeling? >> the knee is bent but it doesn't bend freely. we're still working on it. my doctor is irritated with me. >> at least you're here and we appreciate you being here. tom joyce thank you very much. >> guys, back to you. bob pisani, our thanks to tom joyce as well. coming up more on founder of best buy offering to buy the troubled tech retailer. let's take a look at this morning's early morning movers as well. this is new york state. we built the first railway, the first trade route to the west, the greatest empires. then, some said, we lost our edge. well today, there's a new new york state. one that's working to attract businesses and create jobs. a place where innovation meets determination... and businesses lead the world.
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to create. to work. if you're going to do something. make it matter. welcome back to "squawk on the street." you know interest rates moved up a bit, of course, even though many believe that there's a lot of data points that are lacking, some have improved a bit. look at the 24 hour chart of our tens. we're getting close to unchanged which was at 1.56 yield friday. bund different animal. below 1.40, closed at 1.54. 1.40 is an important pivot. power of the microphone.
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you know what? two year spanish note certainly has fallen dramatically in yields. look at this chart. ten year chart that pushes the point home. we'll have to wait and see one of those primary auctions of a two year security to see what's going on. australian's central bank meet tonight 12:30 eastern. look at this chart of the aussie/dollar versus the green back. four month high. curve inversions. many believe they may cut rates something to pay attention to. faber, back to you. >> thank you, santelli. we have potentially very, very large leverage buy out. potentially taking place, potentially, potentially but maybe not. we're talking best buy. it would be the largest buy out since that of toys "r" us by kkr. when was that >> march 17th, 2005. >> thrng morning we got a letter
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from richard schultze who controls 21% of equity in best buy. the company's founder wants to buy between 24 and $26 a share given he's a 13 d filer. he was obligated to come public with this proposal but he does not include hard evidence of commitments from those who will provide what i've been reporting an additional $2 billion in equity in addition to his billion of personal equity. he needs another $7 billion in debt and $2 billion in additional equity. it would be a $10 billion deal, 8.6 billion for your equity check and $25 a share or so and then additional debt on top of that being refinanced and the like. mr. schultze out of the company not that long ago. had been on the board up until late may or june but source tell me had not been involved in the day-to-day decision-making certainly for over two years because people are wondering what will the plan be that mr.
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schultze would undertake to try to turn around a company that between rapist as good amount of cash but less and less of it with each passing month and quarter. by the way we're going to find out how the quarter just completed was on august 21st. now as for best buy it has responded to this letter that it received this morning with a statement and we have that four. i got it right in front of me. basically saying, confirming that it's got it and will review and consider the letter in due course consistent with its fiduciary duties, will evaluate the proposal carefully. this is a company and a board that's looking for a new ceo or at least says it's looking for a new ceo despite what significant payments to its interim ceo, bonuses, retention bonus and the like. couple of other things to keep in mind. they are operating one minnesota take over law which makes it complex. there's provisions in the bylaws that allow for only 25% of the
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shares to vote yes for a shareholder meeting. when you have schultze in there with 20% it won't take much if this goes down to a really hostile nature for them to call a special meeting of the board and toss the board of directors out. again, if it to were actually come to that. the hope, of course, on the part of schultze is they will say yes, can you form a group. key then move ahead and give us specific commitments from private equity firm or firms to show they have the equity check necessary and the $7 billion in financing necessary to make this deal a reality. interesting, guys, to note the stock is up certainly but well below the 24 to $26 range that's indicated and again it is a melting ice cube many would say and so even schultze talks about urgency in the letter itself meaning we got to get in there and got to get in there quickly. from what i've heard they were being told three weeks, another three weeks and they felt they needed to come now to try to get at least something from the board. not to say yes or no but to
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allow it to form a group. >> sounds like the avon story. we'll get to it. we'll talk. for more on best buy let's bring in an analyst. david, good morning to you. >> good morning. >> what does news -- let's start with your lbo model. >> our model, we were able to get to valuations above that 24 to 26 range as high as 30 bucks with good returns. if you start bring being it down to the mid-20s based on the cash they have pretty attractive financial deal. the risk being, you know, that the business is, it's unclear what direction that business is going over the, you know, medium or longer term. >> do you think the financing is for real? >> well, you know, i think you said it best. there's clearly not definitive but he has some people lined up that seem to have a fair amount of interest for him to go public like this and start this.
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i would imagine although it may not be signed on a dotted line there's some people pretty interested. >> more to the point about the ability of the company to actually continue to generate the cash it is, which would then perhaps lend credence to the idea of 25 to $30. what is your belief they can do that or that a new management team brought in by schultze can do anything different than they did previously or that this current management team at least the interim team is doing. >> when we did our model, we weren't giving a disaster scenario but we weren't very bullish. comps would continue to be negative and some margin degradation and still very handedly get there. the cash flows would still be strong. you know, we're pretty strong believers that there's some technology -- there's a lack of technology out there right now that been hurting them between the pc and the tv category and that this is more of a technology cycle down cycle for consumer electronics as opposed
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to the end of the company or anything more negative like that. we feel good about their ability to do this over a long period of time. >> using the mid-point of the range you crunch the rate of return on this investment is 23% which is not bad. if the price got moved up to 30 what would that become? >> it goes into the high teens at that point. when i was citing the high teens before it was based on our model at $30. low 20s when you get into the mid-20 dollar range but high teens you know at that level. once again that's not on very bullish -- any very bullish scenarios. we would argue it's reasonable to conservative scenario for the stock, for the company. >> david, appreciate your time. thanks for coming to the phone. >> my pleasure. david strasser joining us. >> keep those tweets coming. what does schultze see in the company that shoppers and short
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sellers do not. we got your answers later on. we'll being right back after this.
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"squawk" on the tweet for a monday morning. richard schultze wants his company back. what does best buy's founder sees in the company that shoppers and short sellers do not. justin writes he sees delusions of grandeur. amazon eventually needing to collect sales tax and there by removing the advantage they have. a bird never leaves its nest until its little ones are ready to fly. i'm sure he is looking more at the short term potential. >> it's interesting because there are so many -- there's so much skepticism about bringing in the former manager. what can schultze do? coming up, knight capital's wild ride. the latest short fallout from the trading malfunction when "squawk on the street" comes back. [ male announcer ] it's a golden opportunity...
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for investors, the regulators and you. >> and the market trading slightly higher today following friday's short rally. 180 points from the highs the year. what is next. jpmorgan tom lee will give us his take. >> one of the top story, best buy founder richard schultze offering to take the retailer private. we'll find out what the analysts are saying about that offer and if now is the time to get in. >> want to peek into the lives of the rich. of course you do. who is selling multimillion dollar homes. that's later. >> knight capital ceo thomas joyce talking to cnbc first after an agreement with investors on a $400 million lifeline. mary thompson is outside of knight headquarters with the highlights. good morning, mary. >> in a wide ranging interview mr. joyce spoke about that $400 million financing deal that die lutz existing shareholders and investors receiving 70% of the
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company. the decision came after a wide number of interested parties came and made inquiries. they received about 90 ininquire rice. listen in. >> it was a big number and all types of people. it ran spectrum from private equity investors to of course clients who showed up. to some stress investors. so we had tons of inquiry across a wide spectrum of roads and i'm very confident we settled on the best solution for our company. >> of course critical to knight's stifle is whether clients come back. it's too soon to tell whether big name like van guard will come back. he took sole blame for the trading loss that or trading glitch that resulted in $440 million in losses for the company. but, again, he reiterated given
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the financing deal that was just struck it was a good deal for knight shareholders as well as the industry. >> we're in arguably better financial shape than we were a week ago but the most important thing is we were looking out for our clients in a moment of stress. there was a problem. we took the consequences. none of our clients took the consequences. the industry didn't suffer. >> mr. joyce also had interesting thing about regulators response to the trading crisis as well as his own prior criticisms of what happened with the nasdaq in the wake of the facebook debacle. we'll have more on that coming up at 10:30. back to you. >> mary thompson joining us from knight headquarters. >> brian sullivan has more news on best buy. >> some questions about how they can raise the money, whether or not schultze can raise the money. a few minutes ago i got off a contact of mine. he's big into the retail space as well so keenly aware of the situation.
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i asked him very plainly does he think best buy would be able to raise 7 to 8 billion in debt financing. he said it would be possible but it wouldn't be easy. he said it's a big number. it's doable. but it would not be easy. i also asked him if him or his people have taken a look at best buy. he said everybody has taken a look at best buy because it's a huge company and people have felt this is what he called an actionable play in the industry, in other words, you might be able to make something happen and obviously fees would be very large but sort of implying a lot of people have sniffed around and you can take with that from what you want, whether or not people have decided not to do something or couldn't raise the capital. more insight there from the wall street banker source of mine about whether they can raise the money. yeah, but it wouldn't be easy. might be one of the reasons why we're not seeing best buy stock the rockets that 24, 26 level today. guys, back to you. >> brian, thank you for that. "the economist"s have had the
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weekend to mull over that jobs number and outlook for future growth and fed policy. i want to bring in our senior economics reporter steve liesman. >> far from make anything clearer, the modestly better than expected jobs report has need street end more confused about the outlook for policy. none of last week's data changed forecast for growth june information added to may crow economic advisors a tick to the estimate for the second quarter growth. now it's roll the drums 1.6% if everything stays the same. many economists see a third quarter of around 2%. the most optimistic 2.5, pessimistic as low as 1.2%. it will take some very strong u.s. data and a large equity rally to keep ben side lined. draghi loaded his guns for an unsterilized smp. he's waiting for rajoy to enter
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the eu rehab clinic. jpmorgan reflecting the consensus. fed ready to begin another round of asset purchases in september. goldman sachs says our baseline forecast remains an extension of the forward funds rate guidance. they will go from late 2014 to mid-2015. in the september meeting. qe is to follow 2012 or early 2013 when twist expires. what's interesting, john riding pointed out with rates already so low there's few economists saying any new stimulus from the fed will do much good. growth is low. unemployment is rising. the fed has to act. seems to me until a compelling case can be made about the fed and believed then the outlook for qe will remain murky. carl? >> steve thank you very much. out of curiosity, on a week when we're not getting a lot of data,
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what do you economist guys do all week? >> i'll tell you what i'll be doing. what i predict i'll be doing as a reporter is i think i'll be spending a lot of time knocking down false market rumors about the spanish prime minister asking for rescue funds about the fed holding emergency meetings. it's the kind of week that lend itself to kind of the silliness that you get from markets because you're right there's no fed speeches orb very few fed speeches. there's also very few economic data points. it's zombie news that you'll have to survive. >> absolutely. in august no less. good point. >> exactly. >> steve we'll see you later. let's get a check on the markets. the dow is higher right now. 80 points is the gain. nasdaq is up by 24. and the s&p adding eight points on the day. good for 1399. see if they can cross the 1400
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mark. guys, great to have you with us. russ, where do we stand right now because what is amazing this is a market, s&p that has risen about 10% on the year and certainly doesn't feel that way. >> this has been the proverbial climbing the wall of worry. you had a mediocre economy at best but what you had is supported stocks are a couple of things. reasonable valuation which have loud for some upside. second is that while we haven't seen much in the way of top line growth companies continue to maintain margins. partly because there are some silver lines to a weak economy. cost of labor, cost of capital for being cheap and this has allowed earnings to be decent if not brilliant. going forward if you can remove some of the tail risks and the two big ones are europe and fiscal cliff the market can grind higher into qe3 and q4.
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>> what's the biggest worry. is it europe or the scandinavia? fiscal cliff. because of the elections? >> well, melissa thanks for having me. both are pretty terrifying for investors right now. i would say in the short term there's a road map for the fiscal cliff that will get people panicky. we have a conference call tomorrow to outline jpmorgan's global view on this. the thing that's most fearful today, sunday night what most people were worried about is s&p is up 11% and most professional managers are trailing by huge margin. you have to remember there's only 13% of active managers are beating their benchmark by 250 basis points. it's the worst in the history of active management. >> wow. the work is cut out for guys,
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russ. that sort of adds to the point where investors may gravitate towards these etfs. can you give us a sense whether or not etfs also underperformed. >> we've seen some very strong flows in to etfs over the past few months particularly into fixed income. what's interesting about the flows right now is they show that investors are sort of dipping their toe back in cautiously. where you're seeing a lot of floss are into things like dividend funds, where there's some interest in getting equity exposure but they want to do it in a more conservative way. again, one of the factors which perversely might help the market is a lot of pessimism particularly amongst retail investors and a lot of money sitting on the sidelines. again, if you can remove some of those tail risks we might see that money come back into the market. >> at the same time though, russ, you were pointing out we were climbing the wall of worry.
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that wall less robust or is this less believable because investors are putting money where it is already, there's certain groups that might reach the point where they are overvalued such as dividend paying stocks? >> i think this is a great point. there are definitely segments of this space. we publish ad report on this. one example u.s. utilities a sector that typically trades at that 9% to 30% discount to the market, trade at their premium. judge? it's a dividend paying sector own low beta sector. we've seen this rush into safety and yield. some areas represent value but certainly places like u.s. utilities, potentially riits which are looking pricey. >> let's go david. >> take a look at shares of best buy this morning they are up sharply although far below the 24 to $26 price indicated in a letter received by best buy sent
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this morning from his former ceo, it's founder richard schultze who owns 21% of the company. he said in that letter he would like to buy the company between 24 and $26 a share however he wants to do due diligence. still needs permission from the company one minnesota takeover law to form a group and, therefore, cement at least it would seem the equity commitments that he would need to pursue that bid which would cost as much as $10 billion, 3 billion in equity, that including the billion of equity he would roll into the deal. another 2 billion and 7 billion in debt. he's received a highly confident, i don't cho if it's a letter a highly confident wording from s.e.c. saying it could raise it. no questions in terms of what really will happen. for its part best buy in the last hour or so out with a statement saying it will review and consider the letter in due
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course consistent with its fiduciary duties. over the last three weeks i'm told they had tried to get best buy's board to allow them to form a group and therefore perhaps come what might be a more formative offer from the company. still much unclear is terms of whether they are ever going to get that permission from best buy, what the company will say when it does come back to them with a noformal response to thi proposal. it is somewhat reminiscent of the attempt to try to buy avon. they want due diligence. they don't have committed financing. paid nothing for it at this point. unclear what the plan is that mr. schultze says he would put in place that would turn around the fortunes of this ailing retailer which produce a great deal of cash. you heard from some analysts on the program all right in terms of that cash enabling a potential buyer to hit 25 or
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perhaps as a 30 or $33 a share price given the returns that might bring to them if business stays the same. melissa, i think that's the key question. >> capital r. >> we're is going to -- up next from usain bolt and serena williams, we'll get the latest on the action at the olympic games right after this break. okay, here's the plan. you have a plan? first we're gonna check our bags for free, thanks to our explorer card. then, the united club. my mother was so wrong about you. next, we get priority boarding on our flight i booked with miles. all because of the card. and me. okay, what's the plan? plan? mm-hmm. we're on vacation. this is no plan. really? [ male announcer ] the united mileageplus explorer card. the mileage card with special perks on united. get it and you're in. with special perks on united. it's something you're born with. and inspires the things you choose to do.
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♪ a lot of action over the weekend at the olympic games in london. michelle caruso-cabrera is live in olympic park with the latest. wow whether it's bolt or murray or serena, what a weekend of sports, michelle. >> a great, great weekend for viewing. dying to see the rating crawl. it was exciting. the update on the medal count the chinese are leading the total medal count yet again. u.s. is in second place. however, i think the big story there is line number three. look at the brits, 37 total. they are having a phenomenal olympics shooting into third place after picking eight gold medals this past weekend alone. once again home team advantage playing out in the total medal count. we see this in olympics after olympics, australia 92 opinion
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barcelona. usain bolt in 100 meter and what was happening on the tennis court. bolt of jamaica won the gold again only second man to win that gold twice. previous carl lewis just as impressive. seven out of those eight runners did the 100 meter in under 10 seconds. never happen before. andy murray from scotland but for the brits that's close enough. murray beat roger federer on the same court on wimbledon where he lost to federer a few weeks ago at the wimbledon tournament also on the tennis court. great weekend for the americans serena williams and venus winning gold in doubles. we spoke with serena earlier, she's so excited about the win. >> it feels really good. i remember my sister had two gold medals in sidney because we won the doubles and she won the singles. it was a great feeling. to be able to do the same thing
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here is really cool. >> asked you before we sat down do you think of yourself as a business person and you said only. is that true? i think of you as a tennis player. you get up in the morning you think you're a business person. >> tennis is my number one thing and my life. at the end of the day i do have a lot of businesses do i. tennis is my business in a way. like when i do well or even if i don't do well it's my business i'm involved in. >> what's next? >> obviously the u.s. open is around the corner and i got to start thinking about that because it's in a couple of weeks. but i just want to hold these and just kind of cherish this moment right now. >> doesn't she look great. sidney was '92. i was thinking of you this weekend when i was having a beer at the austria house. five guys showed up wearing the same kind of pjs i gave you. that has turned into white the
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thing here in the uk. >> as it has here. >> you should see it in the morning. you can't take those things off when it's time for the show. >> you don't even know what i'm wearing underneath this suit, michelle. by the way the lesson of the day is do not throw a bottle on track or field. >> yeah. >> have you heard about this guy. >> especially when you're sitting next to the judo guy. >> unbelievable. threw a bottle and got slapped down reportedly by one of the judo olympians. got arrested. he's in very, very big trouble. michelle, thanks. we'll talk to you a little bit later. >> see you later. >> let's get a check on the markets. adding to friday's big rally up by half a percent on the s&p 500, 1398 the level there. the nasdaq is higher by .75%. financials seeing nice day today with likes of citi up almost 3%.
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♪ let's head it over to brian sullivan for a market flash. >> hca. two pieces of news here. the company saying it's received a request for information from the u.s. attorney's office in miami's district about, you know, just checking into whether or not certain cardiology services were necessary. hca got a request for information. just a request for information but the company is complying. but that's out there. also a little more interesting maybe carl from our perspective because as journalists you start to call companies and ask questions, the ceo noting in their conference call that apparently an upcoming "new york times" story about the company may not be too flattering. ceo basically implying that, i guess, the tone of some of the reporters questions or some of
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the questions asked of the company, he didn't go into details about why he felt this way, but he obviously thinks that an upcoming "new york times" story on his company may not be so flattering. so i guess he's guessing but apparently you can tell from the tone. >> well if walmart is any example that's a true buy cycle. we're talking bye, bye, bye. >> walmart the only dow stock up and only dow stock facing fraud allegations. not today, though. >> many times walmart has had an incredible historic run since the "times" ran that 80,000 word story on mexico. we should point out on hca the article may be fairly broad. again according to that conference call. our ownership structure second the quality of care including medical, necessity for cardiac services. and our emergency departments.
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our approach to the care for the uninsured. that again all the quotes at least from the conference call about what this "new york times" story may be focused on for hca. investors saying we'll ask questions after we see the article. >> meantime course the big story of the day knight capital disclosing $400 million financing lifeline from a grouch investors including blackstone, td ameritrade. we'll take you live outside of exciting's headquarters for the terms of that deal. don't go away. so your money can do more. [ rodger ] at scottrade, seven dollar trades are just the start. our teams have the information you want when you need it. it's another reason more investors are saying... [ all ] i'm with scottrade.
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♪ one hour into trading. technology leading the way with the nasdaq up by .75%. let's head over to chicago for more on the markets. jack, always great to speak with you. on the s&p 500 do we break above and hold 1400 today? >> you know, it feels like there's going to be psychological resistant. 1408 is that near term high we're gunning for. only ten points away from that in cash. what we call this on the floor a creeper rally. one of those things where you have portfolio managers out. skeleton crews on trading desks. if we do take out that 1408 watch these hamptons empty out real quickly. >> does that imply if we go to that level 1408 or above the shorts will come back in? >> i think that at that point
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what we'll see is a break out. i don't know if the shorts will come back in. there's a different tone the markets. we're starting to see appetite for risk come back in. something the ecb and the fed in their statements, they used the d word, deflation. they will be fighting deflation at all costs. it means the flip side of that is going to be some kind inflationary methods. >> so central bank put is to speak at this point, jack, at the same time we're sort of in purgatory when it comes to data and earnings and you mentioned that a lot of people are on vacation. we could see some whippy action. what's the catalyst you're looking out for here in markets? >> one of the things you want to pay attention to is watching
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this market digest these valuations if indeed we're starting to see china in their soft landing and europe coming back online. two big things people are debating. but what is a negative can turn into positives quickly. if that's the case look for an expansion in multiples right now with the street beating expectations on these earnings you can look at a multiple taking us to 1400 or 1500 in the s&p. i wouldn't be surprised to see it run that way in the second half the year. >> jack, great to speak with you. meantime knight capital confirming $400 million financing deal from multiple investors this morning, a deal that's allowing the firm to stay in business. mary thompson has more and joins us from knight's officeser in jersey city, new jersey. >> joyce defended that deal which is strictly very diluted
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to existing shareholders. it gives the company's buy notes convertible securities a 70 to 75% stake in the company. the deal of course necessitated by that software glitch last wednesday that triggered a number of erroneous trades and caused a loss for trading firm. joyce calling the trading glitch knight's problems and knight's alone. >> it was a very simple breakdown. a large breakdown but a very simple breakdown. an issue with trading technology. you can be sure right now we're doing an internal investigation to identify what truly happened. we can source then the facts behind it. we're going in the post mortem quickly and come out with solutions as to how we can enhance the system and enhance the environment here. >> of course the trading glitch prompted inquiries from regulators including the s.e.c. the s.e.c. also reportedly reject knight's pleas to have those trades reversed pap
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decision by s.e.c. commissioner mary shapiro joyce said he wished it was different but acknowledged it was the right one to make. >> i did speak to chairman shapiro. we had a frank discussion and she did what she thought was right for the industry. and i have to applaud her for her decision. i'm kind of biassed. i wish she made a different decision. she thinks she made the right decision for the industry and i have to support her in that. >> critical to knight's future is whether or not clients feel comfortable enough to start routing their trades through knight. some good news on that front, vanguard a mutual fund giant said it started to route some of its orders through knight once again. david, back to you. >> buck fifty conversion price was hard to swallow for some shareholders but it saves the
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firms. >> market caps larger now. >> it held around tangible book which is close to $3 a share. all right. let's move on to one of our other big stories of the morning. best buy founder richard schultze offering to buy the struggling retailer for between $24 and $26 a share. let's get more on the story and bring in our analyst michael strasser what would an equity buyer could pay for this thing and generate an irr give end what makes sense is significant borrowing costs not on the bank debt but whatever bonds are placed for the 7 billion in debt they need. >> i agree. i remain highly skeptical. even putting aside what our models might suggest. we have to consider how these private equity firms would monetize their investment. within retail it's been very hard to bring back a challenged
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retailer to the public markets, take toys "r" us several other examples. that to me suggest as lot of skepticism around this deal. >> i'm glad you.it out. the idea of the exit multiple. exit for private equity as important if not more so than the entrance carrily and hard to imagine, isn't it that the exit multiple would be above whatever would be paid if in fact they did go ahead with the deal? >> that's right. the other way to think about it is amount of exposure any private equity firm would be taking to this deal. let's put some numbers around it. say $10 billion is the enterprise value and 40% equity contribution above and beyond what dick schultze contributed to the deal, a billion dollars. $3 billion that would need to be raised. let's say a consortium of five or six private equity firms would be gathered to contribute this equity. that's $500, $600 million a
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piece. a lot of exposure out of one particular fund to this sort of situation. >> i've been reporting it would be 3 billion in equity. your point is a good one. $2 billion. i would point out that while the market doesn't like these so-called club deals that you pointed out with a number of private equity firms you could see one big private equity firm step up and sell down to its own limited partners but, again, there's a very high level of difficulty here. what about best buy itself? where does the company stand? it's searching for a new ceo. how is that going and what about the strategy and what we expect to hear when we get earning in a few weeks? >> a couple of different questions in there. number one, earnings will be messy when they are reported in a few weeks. we saw a host of indications from competitors, from vendors that the environment for consumer tronks has been very difficult in the last couple of months. what's interesting when they do report they are very likely to outline a series of key
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initiatives they will take including some cost-cutting measures so i think that will be much more important than the actual results. process of finding a new ceo is continuing. i think the current interim ceo is being a very hard and thoughtful look for the position. a lot will depend on what he has to say. >> cost-cutting isn't very exciting. doesn't sound very sustainable. i'm trying to understand where you stand. you got a mutual rating on the stock. in assessing best buy's problems an analyst said it was the technology cycle there aren't great tech products right now to help best buy out or is it just a secular problem with its business where people don't shop in that way any more? >> so, it's a good question. i would argue best buy's issues
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are mul multi-faceted and complex. similar trend is played out with pcs and several other categories within consumer electronics. any innovation that we have seen has been dominated against one vendor and that's apple and apple controls a lot of its own distribution. that's created a set of challenges that's difficult to face. best buy has to deal with the problem that has boxes that's too big for today's situation. so, i think in order to address these problems they are going to have to make some big bold moves including closing down a bunch of its big boxes, and outlining steps that are cost-cutting in nature but also don't touch the customer because in this situation you really have to focus on your customer service in toward retain those customers
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that you have been able to serve well in the past. >> that kind of strategy sounds like what's already in place and they are already bringing down the number of stores, trying to make them smaller. is it clear to you that he would bring a strategic plan that was markedly different when he was still there? >> think that's totally a valid point. not only that several of the executives that he's suggesting he's lined up to bring back aboard were on watch when a lot of these problems were only starting to materialize. so we can make the argument that under their view and under their watch the company didn't move fast enough and so now you have to assume we're moving faster and bolder to address some of these challenges which seems like a very aggressive assumption. >> all right, michael great to sanctify. thanks for your time. >> send it back to brian sullivan at headquarters. >> cognizant technology solutions that stock is positive for the year coming out and
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raising full year guidance. also beating the street. this is basically an i.t. solutions and outsourcing company. if you look at the segment, it's interesting the biggest beat they had in terms of sales was in financial services. all areas rose but financial services were the biggest growth driver. stock up. back to you. >> interesting. thanks so much. when we come back secret lives of the mega watch. we have the story of a super broker who made her name selling multimillion dollar homes. some pictures you have to see to believe when we come right back.
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no problem. you want to save money on motorcycle insurance? no problem. you want to find a place to park all these things? fuggedaboud it. this is new york. hey little guy, wake up! aw, come off it mate! geico. saving people money on more than just car insurance. but they haven't experienced extra strength bayer advanced aspirin. in fact, in a recent survey, 95% of people who tried it agreed that it relieved their headache fast. visit fastreliefchallenge.com today for a special trial offer. dakota is one of the most glamorous buildings in new york. this is where john lennon and yoko ono lived there. judy garland. it's a cultural institution in new york. >> nicholas and i are on the way
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over to meet the client at the dakota. they will meet the board of directors of the building to hopefully get board approval. >> people who have been rejected from dakota including billy joel, cher, roberta flack had to get approval to put in a new bathtub. >> that's what makes it fabulous you can't get in here. >> that was a sneak peek of secret lives of the super rich mega homes which premieres tonight on cnbc. joining us on set today, wealth editor robert frank to give us more insight into the world of luxurious living and what it takes, the rockets get in, to get past that board the dakota. >> it's really a club as opposed to a home. to get into these places the dakota, this couple needed 10 boxes they had to bring in a hand truck. it makes the presidential election look a light background check when you have taxes to
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interview your former neighbors to find out what kind of neighbor you were. some of these buildings they interview your pets. if your poodle was drooling too much you might not get in. >> excuse me. really? >> in some of the upper east side buildings. it's real detailed. >> not just about how much liquidity you have after the purchase. >> money for some of them. some of these buildings you need ten times the purchase price in cash after. if you buy a $30 million apartment you need $300 million -- it's ridiculous these numbers. 300 in cash just to get in. it's a big bar. then after that the social things. >> having grown up in the city, knowing that neighborhood in the 1970s you could have gotten and apartment at the dakota, unfortunately by parents didn't buy it for about 80 grand. the world has changed so dramatically all over the place but certainly here in new york versus what it was 20, 30, 40
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years ago. >> so true. one of the things we look at is one of the reasons it changes is the amount of foreign money coming in to new york. it's crazy the russian, the china. we profile -- one of these apartments sold in the time warner building close to $4 million and it was for the sons and daughters of wealthy chinese families who are going to college in the u.s. $4 million dorm rooms in time warner center. the foreigners want to get cash out of their country as quickly as possible. it's a safe-haven. >> i imagine they would want more flexibility so they tend to not go to the co-ops of the world like the dakotas and a lot of people in the country don't know what co-op is. you own a share. you're all in it together. carl doesn't pay his maintenance then i'm on the hook for it. they go to a condo which is
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shifting from the marquise properties. >> you're slilt right. 15 central southwest on do. that's where this russian family bought for his daughter $88 million, bought that for his daughter who is in college. that's an $88 million dorm room and a condo. >> so there's an article over the weekend in the "times" about another russian billionaire who is trying die vest out of his country. would you say the real money is the russians or chinese? can you decide? >> the real money is the chinese although the russians are doing the big ones like the $88 million place. the chinese put in $9 billion of u.s. real estate in the past year. the russians themselves are spending over a billion a year. so those two especially at the high end authors the big buyers. >> got that building going up on 57th street in manhattan. have they sold that top apartment for $100 million? >> they say they have. they say they got hundred
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million dollar contract. some might be options to buy. i'm leery -- anything that's priced at $100 million i wonder -- >> the high end keeps going higher and higher. it's very, very -- >> it does. 88 million is the current record in new york. i suspect within the next two years we'll see 100 million plus real sale. >> we're getting a glimpse into these apartments. an important component of this documentary also is the character through which we're seeing this and that is dolly. she's one of these rare super brokers in manhattan. you're saying she carries what eight, nine blackberries around. >> she has nine blackberries. dolly is the real deal. some of these shows selling new york they never sell much. you don't see real rich people. in this show you get places cameras have never been. cramps don't go into the dakota and you see a $5 million property get purchaseed.
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dolly is incredible. celebrities she deals with. the real rich guys. there's a great one scene in the documentary with the guy says dolly my $12 million apartment is not selling you need to get you want done. you see the from these rich peo. but she's a fascinating character. >> she was going to be with us this morning but can't be because -- >> she has a mega deal and she's trying to close. you know, she is always on fire, hitting the buttons, and she has a deal to close this morning so she couldn't be here. but she'll be on tonight at 8:00. >> this couple, you're going to tell us whether or not they get in? >> you'll have to wait for that. it's a cliff-hanger. >> you're already learning thank you tease. >> exactly. >> robert it's great seeing you here. >> thanks so much. >> come back often. do not miss the premiere of secret lives of the super riff mega homes. it's tonight at 8:00 eastern time after the olympics on cnbc. >> and for mega homes here at nyc over to the windy city, rick santelli what are you working on? >> well, i think we'll talk some more about europe, and the notion we discussed before,
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taxation without representation. much of what's being done in europe doesn't pass the proper litmus test but the leaders aren't going to worry about that so much. maybe the bigger story is how the people react over time. now that's the story. we'll also do a postmortem on your unemployment report, and a lot of the economic data we had last week and supply coming up this week. [ male announcer ] this... is the at&t network. a living, breathing intelligence teaching data how to do more for business. [ beeping ] in here, data knows what to do. because the network finds it and tailors it across all the right points, automating all the right actions, to bring all the right results. [ whirring and beeping ] it's the at&t network -- doing more with data to help business do more for customers. ♪ why? i thought jill was your soul mate. no, no it's her dad. the general's your soul mate? dude what? no, no, no.
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welcome back. the market flash, look at all the mattress companies, select comfort, you've got tpx, tempur-pedic, zz. they're all rising because advent international is going to buy the maker of sealy and serta for $3 billion. that company is the parent company filed for bankruptcy in 2009 after a series of deals. well, advent international will make a deal for that company. it's private but the publicly traded companies are moving higher on that news. back to you. >> all right. thank you, brian. best buy founder richard schultz wants his company back even though some see the big box
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brick and mortar business becoming a dying breed. that brings us to the squawk on the treat. what does best buy founder see in the company that shoppers and short sellers do not? tweet us our handle is @cnbcsquawkst. your answers coming up. here's one you may not have thought of -- fidelity. now you don't have to go to a bank to get the things you want from a bank, like no-fee atms, all over the world. free checkwriting and mobile deposits. now depositing a check is as easy as taking a picture. free online bill payments. a highly acclaimed credit card with 2% cash back into your fidelity account. open a fidelity cash management account today and discover another reason serious investors are choosing fidelity.
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squawk on the tweet for a monday. best buy founder richard schultz wants his company back. so what does he see in the company that shoppers and short sellers do not? we know there are more short sellers than shoppers some say. john wright's invisible shoppers. barry writes competition between ipad, nexus and surface. consumers are going to need a store to decide what to buy. and chris writes his ego is saying he could turn it around since he was the founder. maybe there's an argument to be made that in an era of multiplatform technologies, tablets and products you're going to want to seek out some experience from the geek squad type? >> yeah, some advice. it's possible. >> yes. >> it's also possible that he goes down this road a little bit and then chooses to sell his stake. so keep that in mind, too. that is always the possibility, as well. he has said so in the past. either i'm going to try to buy the company or i may sell. >> meanwhile we're watching market up 82. close to session highs.
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ge, of course, which had tried on friday to get past 21, and today getting up to 21.13. 21.17 takes it back to march of 2011. not quite the 60 that we all talk about, david. >> no. progress. we're a long way, progress indeed. it has benefited in part from that dividend yield like so many other stocks of similar nature. of course in this case after reporting earnings it did fine, despite what is large exposure to international markets unlike many of the other movers we've seen over the last couple of months. >> what they've done with capital and energy, too. >> target is also hitting a 52-week high. this is one that's been on a tear, sort of mirroring walmart. walmart had been on a tear since "the new york times" wrote that article about foreign corrupt practices, possible violations there. we are seeing the high on shares of target, 62.90 is the new high on that stock. >> all right. so david i assume you're going to continue to cover best buy.
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>> cover best buy through the day today. yes, absolutely. at least an interesting potential deal. potential is the key word. >> nice thing to walk into. >> yeah, exactly. >> on a monday morning. see you guys tomorrow. have a good afternoon. if you're just joining us here's what you might have missed earlier today. >> welcome to hour three of "squawk on the street." here's what's happening so far. >> it's official this morning, knight capital announcing just moments ago that investors have agreed to purchase in aggregate of $400 million. >> you have the rally despite supposedly disappointments by policymakers. you know, that's usually a better sign. >> richard schultz, former founder, chairman of best buy, joe, has made an offer to acquire the company for $24 and $26 a share in cash. >> why would you say that it may or may not be real? >> well, i'd like to know who the private equity firms are. i'd like to know that they actually committed to providing that equity. $2 billion is an enormous amount
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of money in this market. >> the concern here on friday was that there was a probability, a fairly good probability that this firm ultimately would be broken up and sold for its parts. the most valuable of which was that market making operation. that's not going to happen. but on the other hand they've got a slew of new investors that now own 75% of the company. there's the opening bell. >> we're going to do our best to restore knight to what it was. as far as i'm concerned it's business as usual at knight capital. >> if you can remove some of the tailorists, the two big ones are europe and the fiscal cliff can the market can continue to grind higher into q3 and q4. >> good morning. good monday morning. we're live here at the new york stock exchange. a check on the markets with the dow up 77 points. we're kwisically about 100 points from the highs for 2012. interesting day. getting awfully close to cracking 1400 on the s&p. nasdaq as well up 23 points.
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call it a case of the best buy effect. shares of radio shack were up as much as 6% earlier today on that possible buyout news at best buy. and we are watching shares of teva after a company received a s&p from the s.e.c. over its compliance with u.s. anti-foreign bribery laws in latin america. the road map for the next hour. best buy founder, richard schulze offering to take the struggling retailer private. we'll find out what analysts are saying about the buyout offer and if now is the time to get in. plus luxury auto brand audi unveiling its newest sports car. could it be a game changer for the automaker's sales. the president will join us for the big unveil in just a moment. also she brought home the silver medal in '06. olympic figure skater sasha cohen will tell us how she's breaking into the world of business. but first back to one of the main tock stories of the day. on the cnbc news line, colin
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mcgrabahan. good to talk to you this morning. >> david, good morning, thank you. >> how much credibility is behind this bid? >> well, you certainly up the credibility level when he had the commitment from credit suisse to provide -- or they think it's highly confident. the unknown is private equity. we don't know exactly what kind of leverage ratio credit suisse is looking for. having not named the private equity firms and still needing permission from the board, this is certainly not a firm offer. if anything it's kind of an indication of interest. >> does it suggest to you that he has somehow evolved in terms of his strategic approach as to how this company should be run? >> he certainly has ideas on how to do that. put together a seem of some of the former executives. i think adding substantial
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leverage, substantial debt to the value probably make it more difficult to do what he wants to do. restricting cash flow, constraining flexibility for the firm to do some things. it's not clear being private would be an easier way to achieve whatever he thinks needs to be achieved. >> yeah. does it feel to you like this is more of an attempt to resuscitate it and flip it or to try to build, rebuild this retailer in what is obviously a more difficult challenging environment? >> i'd say it's actually neither. i think schulze has no intention of flipping it but he wants that in. he thinks he has a better play on it now to improving the company. wanting back in and putting to the a truly firm commitment of private equity to get it done but it's still a ways away from where we stand today. >> all right with the stock now, of course, it's melted off since the early premarket bid, but with this 24 to 26 offer, what looks fair to you?
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and where -- how is it affected your price target today? >> we haven't changed our price target. but the stock is trading here today in a range about 18 to 26. 24 to 26 is probably the minimum credible offer but my guess is that shareholders who own the stock think it's worth more than that. if the board sees a successful turnaround it's probably worth more than substantially more than that. it becomes challenging and tricky for the consenior shum because he has to bid higher and it's not clear that can be done. >> what do you think the board's reaction is going to be? >> they put in a very brief statement saying they'll consider shareholder interest but they also made it clear this was an unsolicited indication of interest and not a firm offer. so they'll consider all possibilities but when you look at the offer as it stands my guess is that we're not going anywhere from the board perspective any time soon. >> so let's pretend for a moment that you run, rather than
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working for bernstein you run mcgranahan capital management. would you help him do this deal? >> i would be reluctant to do that. it's a challenging situation. adding a substantial debt to the balance sheet would put more pressure on the firm. a very low margin business with a shrinking top line. if i'm a private equity firm i want a fairly clear exit strategy two, three, four years down the road. and it's not at all clear that can you take this firm back to the public in any kind of a reasonable valuation. i think it's certainly, there's lots of challenges about thinking about it from a private equity perspective. >> yeah, we keep hearing echoes of skepticism from analysts that we talk to today. it does, though, reinforce some of the dangers of being short. some of these companies out there that look like they are doomed, because there is the possibility that someone like a schulze can come in and change the dynamic at least short-term. >> it's very dangerous
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especially when you have a former chairman who is in a situation to make offers, whether or not he has the financing and backing for it. it's a very dangerous equity to be short at these levels. >> colin appreciate your coming to the phone. thanks so much. >> thank you very much. >> senior analyst over at sanford c. bernstein talking the best buy story today. let's get over to the cme group with rick santelli. get this morning's edition of the santelli exchange. good morning, rick. >> good morning carl. well, indeed, if we look at some of the stories, and i read a boatload this week friend the "financial times" to the telegraph, to our newspapers, sunday morning shows, talking about europe, but as i take a step back, there's a couple of things that have not changed, despite the bazooka being a gun, bubble gum, now somewhere in the middle as we try to debate mr. draghi's comments. what shines through are two areas. we've talked about them before and they will never go away because it is at the epicenter of whether anything will work and take traction and truly
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promoting growth in some of the weaker european economies. that is the citizens number one. the citizens. they have to go along with it. and number two, to the same vein, we need private investors to be involved in the auctions of some of the peripheral countries like spain, like italy, like portugal. why? because the daisy chain of help of one country in trouble donating to other countries in double, as it was said on this very show eight weeks ago, it isn't going to work. take it a step farther than that. the first part the citizens. we talked about taxation without representation. what i see is the ecb is growing into its own little form of girl. there isn't a federal constitution that allows that. and to think that they're going to demand reforms from countries and then ultimately get into some type of recourse, how can they? the people of spain aren't represented in europe. in italy. in germany. and the people of germany and italy aren't represented in
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spain. in terms of u.s., i know we have an election coming but look at the data we've had recently. first of all look at all the percentage closes in stocks up 2%, down, i'm talking about sustained credibility of market moves so we can all make value judgments. our latest gdp number is 1.5. in the fourth quarter '09 is up 4%. first quarter of '11 up 0.1. fourth quarter up 4.1. currently at 1.5. it's all over the board. now, if you look at jobs and this is interesting, too, our last number 163. i've heard so many people say oh, the next several are going to be big because of the elections. it's all over the board. if you look at 411, april of '11 it was 251,000. august '11 it was 85,000. november and twelve, 275 june of 1264, 163. you can't really find a direction. why? because our plans are every bit of continuous as these numbers. back to you. >> we'll talk to you in a few moments. rick santelli over in chicago.
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one of the big story, a group of investors set to rescue knight capital in a $400 million deal that will keep the company in big. bob pisani spoke one on one with ceo thomas joyce earlier this morning on "squawk." >> good morning. the important thing here is that he kept the firm together. that's what was important here. it was costly though. new investors now own just about 75% of the company. that's a huge number. the share count has quadrupled but thom joyce insists it was the best deal he could make right now. >> the flattering thing is how the industry responded to us. the wildly flattering thing was how our clints responded to us. because a lot of the incoming phone calls came from our clients when we were under stress last week. so over the course of the weekend, between cliejts and other interested parties, we heard from a lot of people. >> now mr. joyce was very vocal in his criticism of nasdaq during their handling of the facebook ipo. that was a bit of a problem.
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he now faced his own embarrassment but he maintains there is a difference between knight's snafu and the facebook snafu. >> we screwed up last wednesday. knight capital group screwed up last wednesday and knight capital group paid the price. nasdaq screwed up on that friday, and the industry paid the price. so i think it's different. >> as for all the investors carl there seem to be a lot of different motivations. ameritrade wants to keep competition going. for the others, pretty good investment. finally vanguard has also confirmed they are routing orders to knight. ameritrade and stocktrade already announced that on friday. >> and striking bob, his level of candor in discussing what he wishes mary shapiro had done but clearly did not do. >> well, you know, what is interesting here was there were very, very clear rules for
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determining what erroneous trades were. and the reason they are, they tightened up the rules after the whole flash crash. so the nyse and the s.e.c. were under fairly tight constraints in defining what an erroneous trade actually was. there was a fairly small number that fit into that deaf 234igs. it wasn't that controversial. i think tom felt it was bet are for them to be more flexible. they stuck to the terms of their own rules. >> good stuff this morning, bob. bob pisani our capital markets editor gary kaminsky had some thoughts on knight since last week. >> many thoughts. let's try to focus on them. i did think the firm would survive. obviously it did. thom joyce in that interview with bob referenced the work of jefferies and o'neill in saving the firm. i don't know thom joyce but watching him this morning, this is the kind of guy that you want to go to work with. this is the kind of guy you want leading your ship.
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this is if you're a soldier, and you want to sit at the big boy table as they say on wall street you want to sit at the big boy table with a guy like that. because what he said was so admirable, if you think back of how this has transpired over the last week this is how the system is supposed to work. i've spoken with you for many times over the last year about this idea of partnership capital when wall street firms, partner capital as opposed to permanent capital, if you make a mistake, if you basically take position and you are wrong in that position, you pay the price. that's what we saw happen over the last week. and i think this was a great situation. i think that this was the most encouraging thing i've seen, really going back to 2008, in terms of trying to figure out how you rebuild credibility outside of this building. and outside of wall street with main street in terms of how the system should work. i think this was a great, great development. >> common shareholder might not agree with you. >> that's what common shareholders take the risk. when you buy a bond you buy a bond. when you buy stock, in any
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company, you buy stock. that's the risk of owning ek wit if i >> should they not have had a say at all? >> i think i heard i think david asked the question in sense of did you, you didn't have the time. this is a business where 23 you don't have the human capital, functioning at their desks, this morning, you don't have the time to basically do anything. so i think it was an admirable way it was handled. and let me just say this i mention 2008 carl think about the people whether it be bob dimon recently, stan o'neill of merrill lynch. joe gregory at lehman brothers. i hope if they were not out in the hamptons, you know, playing golf this morning, that they watched that interview and they heard mr. joyce say we screwed up, we paid the price. because there's a lot of people going back to 2008 that needed to hear that and unfortunately i don't hear a lot of them still saying we screwed up. >> so is joyce the anti- -- >> you can say that. i think he alluded to the fact of what the difference was.
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i guess we can consider the facebook nasdaq thing a situation that's still under development, right? we can't sort of put it but i think if you just reflect over the last seven days this is how you deal with a situation. and this is how you build main street credibility. this is how you do it. >>. we'll talk more about it. they're not done. they still had a longer road to go. >> they do. but in the sense that they could have been out of business for those that know how this how this industry works the doors could have been shut this morning. and the doors are not shot. >> we're going to check back across the pond, take you to the largest mall in all of europe which just happens to be in london's olympic park. you actually have to walk through it to get to the sports venues. back in a couple minutes. born with. somet and inspires the things you choose to do. you do what you do... because it matters. at hp we don't just believe in the power of technology.
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one of the most visible buildings in olympic park is a massive shopping center, the biggest in all of europe, to be exact. our michelle caruso-cabrera had a chance to check out the west field mall. good morning. >> hey, good morning to you, carl. let's show people exactly where it is. we show you this shot every time right over my shoulder, the athletics track and field stadium. and then to my right we have a camera that is isolated on the mall, just off to the corner here. it is smack dab next to the
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olympic village where all of the athletes are staying. as we pan over to it, we can show you team gb for example is in it. all the flags all over that building there. the mall, when you think about it, think of it as a building block in an effort to get the brits to change the way they shop. through olympic park and you'll see stadium after stadium housing for the 4ri78 pick athletes and the biggest urban mall in europe? yes the west field stratford city, has nearly 2 million square feet of retail space. when it comes to the key rule of real estate, location, location, location, westfield mall can't be beat. it's estimated that 70% of all visitors to the olympic park have to walk through this mall. the ceo tells me traffic skyrocketed from an average of 800,000 shoppers per week to more than 2 million as the
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olympics got under way. but the olympics are only three weeks long. then what? >> we didn't build this building for the olympics. we built this building for the people who live in the area. the east side of london has been really underserved. >> what will happen after the olympics? are you going to see as much traffic? >> no, yes. >> you will? >> yes. there's no doubt about it. >> with stratford city, westfield is trying to instigate a british retail revolution. they're trying to get the brits to shift from shopping on main street, here they call it the high street, and instead spend their pounds at big retail complexes like this one. >> they're trying to change the way the british shop. they're trying to almost make us shop like americans in big malls. think of the mall of america. this mall that we're standing in the westfield mall is almost the same size as the mall of america. so they're trying to chain the habits here. the question is, will that really pan out? >> so, the traffic has been so huge, carl, they actually had to prevent people who actually wanted to just do shopping and go to the mall. they can't go unless they were
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carrying an olympic ticket, or there was some member of the olympic family or had some kind of credentials. that's how crowded and crazy it's been. >> really packed with people. be a big night tonight, of course, michelle, as we await watching gabby douglas do the uneven bars. and then a story today about we know some of these olympic families don't necessarily come from money. and sometimes the straits are a little more dire than others. >> yeah. we've also learned that gabby's mother natalie hopkins filed for bankruptcy back in january. she lists about $163,000 worth of assets but $80,000 worth of debt. most of that is a home in virginia and also a car. she's been on permanent disability since 2009. says she's only got about $4600 worth of income. that's according to the filing and she's been told she has to pay about $400 a month over the next five years to pay back smaller portion of her debts. but she did file bankruptcy back in january. i think we're only finding out about it now because we're only all paying attention to her now
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as a result of gabby's stunning performance on the field here. >> yeah. and hopefully the deals start pouring in. i have a feeling that kellogg's box is just the beginning. >> sure. >> michelle, thanks so much. michelle caruso-cabrera in london. when we come back, olympic silver medalist and u.s. figure skating champion sasha cohen will join us live. she studies economics at columbia now. she'll tell us how she's looking to strike gold in the business world. ♪ [ male announcer ] you've reached the age where you don't back down from a challenge.
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welcome back to "squawk on the street." the gunman who killed six people at a sikh temple in southern wisconsin has been identified as 40-year-old former u.s. serviceman wade michael page. police say page purchased the pistol used in the shooting within the past ten days near his home. earlier this morning police searched for clues to page's motive in an apartment believed to be his residence. meantime mars rover curiosity is already sending back images and data just hours after landing on the surface of the red planet. nasa mission controllers cheered when they confirmed the safe landing after curiosity sailed through space for more than eight months, covering 352 million miles. the curiosity project cost $2.5 billion and will search for signs that mars may have once possessed the ingredients for life. >> happy guys in polo shirts overnight.
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thanks so much. a few minutes left in europe's trading day. four minutes, in fact. we'll get the close and the details on the impact on our afternoon session right after this. this is $100,000. we asked total strangers to watch it for us. thank you so much, i appreciate it, i'll be right back. they didn't take a dime. how much in fees does your bank take to watch your money ? if your bank takes more money than a stranger,
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markets closing across europe in just about a minute or so. shares inching to fresh four-month highs even though financial markets are still waiting for some greater clarity on the next steps in europe's debt crisis, of course. sitting around 1.23. but the spanish ten-year bond yield still dangerously high. eurozone banks and insurers among the big gainers today while health care sold off as investors adopt a more pro-risk stance in some of their portfolios. take a look at the dow as well. up 77 here. this is coming off of four straight weeks to the upside. of course that gain on friday was the third biggest percentage gain of the year. up about 217 points. at this stage about 100 points from new high for the entire year. for all of 2012, and the dow's interestingly a little more than 100%. nearly double the march '09 low. we continue to watch a bunch of the components, general electric with a fresh 52-week high today. anything above 21.17 by the way,
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on ge, would take it all the way back to march of 2011. also new 52-week high on target this morning, as well. we're going to get the european close in a few seconds. first want to get some breaking news. >> carl thank you very much. we've got some pretty explosive news coming out on standard chartered bank. and bear with me here folks. this is just crossing now and it's pretty deep. standard chartered bank's basically has been accused of, after an investigation by the new york department of financial services, reviewing more than 30,000 pages of bank documents for conspiring and scheming what they called with the iranian government and iranian owned banks. basically here's the bottom line. the new york state department of financial services found, after reviewing 30,000 documents, interviewing people, et cetera, that standard chartered bank hid transactions to earn hundreds of millions of dollars in fees on behalf of iranian institutions that were subject to u.s.
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economic sanctions. that standard chartered bank officials actually stripped out the record of who they were dealing with in these transactions. according to the new york state department of financial services, standard chartered bank officials knew they were breaking the law. they lied to regulators to cover up their activities. and that there is some suspicion that perhaps some of the transactions involved may have been used to funnel money to hezbollah, hamas, terrorist groups, et cetera. and guys, let's keep going because i want to read you something here. those are bad enough. i'm going to give you the orders of the new york state department of financial services as pertains to standard chartered in just a moment. i want to read you this. in october of 2006, the ceo for the americas for standard chartered bank wrote to the group executive director at headquarters in london, that the iranian business has the potential to cause very serious or even catastrophic reputational damage to the group.
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as quoted by that same branch officer, the group director in london replied, either by e-mail, phone or in person, you f-ing americans, who are you to tell us the rest of the world that we're not going to deal with the iranians? standard chartered bank has now been ordered to by the new york state department of financial services appear before the superintendent of financial services to demonstrate why its license to operate in the state of new york should not be revoked. demonstrate by standard chartered bank's u.s. dollar clearing operation should not be suspended. pay for an independent on-premises monitor for the department which will ensure they fully comply with anti-money laundering operations and any assessment of monetary penalties shall await a formal hearing. just to reiterate because i know it's a lot. i'm looking at a two-page press release here. basically standard chartered bank has been accused by the new york state department of
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financial services of conspiring and scheming with the iranian government, stripping out important information, and i gave you some of those quotes after reviews of 30,000 pages of documents. standard chartered does not trade here. there's your trade in europe. the stock is still up 2%. but the news just crossing right now. i'm sure we'll have much more on it as the day develops. >> thanks so much. brian sullivan back at hq. courtney reagan joining us on the nyse. >> carl, looks like the dow is up about 71 points. a bit off the highs of the session. but still looks like we could be breaking this streak for the dow. we've seen the dow lower for nine, ten mondays. hopefully we can hold it into the positive for the rest of the day. most of the major sectors are higher with the exception of utilities and health care. it's the risk on trade we're seeing again today. we've got financials and materials leading the way as some of these global growth concerns have begun to ease a little bit, at least for the time being. we saw strong finish for europe. some of those indices finishing at multimonth highs. take a look at some of the
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commodity names in particular. the underlying commodities also performing strongly today. u.s. steel up 4%. freemortgage mcmoran up. some of the gold stocks also trading higher. crude oil. the banks a breakout from the financial city. bank of america, morgan stanley, jpmorgan, some of also the european banks seeing a lot of strength today. besides of course what brian just broke out on a very particular bank name overseas. and then if we can get back to the knight capital story for just a second we have learned that e-trade is the most recent broker to resume its orders with knight capital. and vanguard this morning, td and td ameritrade and scott trade resumed their trading on friday. looks as if things are getting a little bit back to normal. we spoke with thom joyce so we'll be watching shares of knight. at least it looks as if some of
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the broker dealers transactions are beginning to resume as schedu scheduled. >> let's get over to rick santelli in chicago as well. imagine watching a few things european and domestic. rick? >> yeah, i like to look at the markets, even though the markets aren't giving us an accurate picture. if you look at a chart starting on may 1st, carl, of the spanish two-year we can see it's currently around 3.65 or 3.70 but it's been awhile since we've had a two-year note auction. we auctioned off 2016s last week and the yields were significantly higher. to watch the secondary market realize what type of investors are living and trading in that realm it is far from your normal investors, mostly large hedges. now if you look at the other side, where investors really are camping out, where their vote of confidence is really showing up, look at the difference on a two-year in switzerland, which
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is trading about minus 45 basis points. that's a much more pro-active assessment of where investor dollars are going to go. this speaks volumes about why we need to continue to not only talk about what yields in a secondary market are doing. but the ability of the european central bank to pack the house with buyers. we need real buyers. the ones that are running to switzerland. how do we get those? and i still don't really see an answer, carl. >> a lot of people don't see an answer. rick santelli. straight ahead, a first look at audi's newest sports car. see what it can do for the automaker sales. the president of audi of america joins us right after this break. okay, here's the plan.
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all right coming up at the top of the hour on halftime one of the major investors in knight capital, you'll hear from him first at the top of the hour. vanguard founder jack vogel joining us as well. one of the most recognized and trusted faces on the street. he tells us whether the market can be trusted following the knight debacle. plus is apple on the verge of making a huge mistake? we'll reveal that. >> all right thank you so much, scott. meantime sales of luxury brand audi up a staggering 20% in california.
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but will issues of quality keep them from becoming a luxury force in this country? phil lebeau joins us with an exclusive interview this morning. good morning, phil. >> good morning, carl. i'm here at an audi dealership in burlingame, california, just outside of san francisco. joined by scott keogh, the president of audi in america. and this beautiful scar the rs5. this is the newest sports car that's coming here. but this is a limited production vehicle. >> yeah, we think with sports cars that's the way to do it. so be limited to 1500 units over two years, over the model years. it's a car we're launching in sonoma. it's a stunning vehicle. stunning grill, dual plus transition. >> that market is still there? the select sports car. >> we see it. it's a good way to build a brand. people want these types of cars and they want them from audi. >> let's talk about building the audi brand. when we take a look at luxury brand sales here in the u.s., you are now number five, passing cadillac. you're outpacing bmw, mercedes,
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the industry overall. do you feel as though you are riding the wave right now or do you think that this is just the beginning of an extended run? >> for us at audi it's the beginning of an extended run. we've been investing $2 billion a year in product development. this is great technologies, great products. the brand is hot. dealers are investing. new products are coming. we see a lot of upside. >> the brand is hot. but you still have this issue that is out there. you know it very well. whether or not you licked the reliability problems. we take a look at the jd power latest initial quality survey. you're the only luxury brand that is below the industry average in terms of quality. >> i think you need to look at this in a couple of ways. first and foremost the same jd o power study, people like our cars. and people who drive audis love them. a-8 was the number one car in the industry. jd power and the iqs i think two things industrywide quality used
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to be things breaking. if you look at audi it's just not happening. warranty claims is down 60% over the last four years. what is happening, is concept. and we as a brand can definitely do a better job of explaining the concepts. >> still overengineered the vehicles do you believe? >> our customers love technology. they love the latest features. they love the latest things. i don't think we ever want to completely lose that. that's what people want. we can certainly explain it a little better. >> let me ask you about this market for luxury vehicles because when we look at the power information network transaction price data, and this is what people are actually paying at dealerships, there is clearly a shift down from people paying over $75,000 to wanting to pay less than that. >> yeah. >> are you seeing that at dealerships? and what's driving that? >> i think we're seeing a little bit of that. but the truth of audi is we used to be around a $40,000 car company. if you look over last years average transaction is $52,000. so what we call our cd mix, a-6,
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a-7, q-7s used to be about 15% of our sales. now it's 30%. so we're seeing a big push. upmarket with the brand and with the products now specifically the 75,000 you get into rarefied air. i think the truth of the matter is you can get an awful lot of good cars. the segment's competitive, we recognize that. our transaction price has been going up. >> are you seeing the luxury buyer pull back just a little bit? >> we are not. i think what we're seeing is the luxury buyer looking for smart choices. i think a lot of brands we see as competitors are a little frivolous, superfluous, a little over the top. we siaddy technology, smart brand. that's what people want. >> final question, the rs5 starts at $69,500. and i know it's limited volume. you're going to sell the 1500. >> yes. >> the day of that limited run, $70,000 vehicle, is it got to be capped at 1500 in order to be successful?
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>> we think we can get a little more. but the magic of audi and this business is people get extremely high on their own supply if you will. they start pushing cars into the market place that's not there. we like to always have one less car than there is a customer. it's healthy for profits, for dealers, good for business. >> scott keogh, president of audi of america. >> thank you very much. >> at the audi dealership in burlingame. carl he was talking about whether or not you had one less vehicle. if you had only one q-5 on the lot here. they are running very thin. that's the way you want to run a dealership these days. >> good stuff, phil. phil lebeau joining us from california talking some audi. when we come back, she brought home the silver in the 2006 olympic games. now she's conquering wall street. olympic figure skater sasha cohen after the break to talk olympics and some business as well. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit,
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after years of training and dedication to a single sport, post-olympics life can be a big change. former olympic figure skater sasha cohen spoke with anne thompson about life after the olympics. >> reporter: winning the silver medal in women's figure skating at the 2006 olympics. she thought she'd seek her future in hollywood's bright lights but she finds business more ther liking. >> ice skating has always been white and black and beige. >> reporter: cohen is designing her own line of figure skates in new york's flatiron district. >> we're making it high end and glamorous. and we're also opening up skating world to so many people by making an affordable, high-quality skate. so it's fun to be able to work both ends of the spectrum. >> reporter: this native californian is now a new yorker with her sights set on wall street. at 27, she's going to college.
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studying financial economics at columbia university. cohen says the thrill of the markets is the closest thing she's found to the thrill of the ice. >> it's similar to being an athlete but it's important. when you wake up there's something going on and there's always something to analyze. it's a competition. it's anticipating, predicting events. it's keeping your cool when other people aren't. >> reporter: with school out, cohen keeps her competitive fire stoked. >> all right. nice job. >> reporter: getting together with a group of former olympians. figure skater tara lipinski, speed skieter joey cheek and mogul skier jeremy. and yes she is watching the summer games and remembering. >> when you step away from it you appreciate the sacrifice. and you appreciate how much you inspire other people. >> reporter: forever an olympian, cohen now uses her past to build a future. anne thompson, nbc news, new york. >> and olympic figure skater and 2006 silver medalist sasha cohen joins us at post nine this
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morning. sasha, watching that tape, and having spent some time with you recently, i've got to ask you first and foremost, you've been watching the summer olympics, what have you been watching? what have you taken away in terms of your own strength that you see with some of the competitors right now? >> i think as a former skater, and gymnast, my heart is always with the gymnasts. and they're so incredible. so poised. and at such a young age to handle that pressure from the world. and perform tricks that we can't even imagine our bodies doing. it's definitely my favorite sport. and will probably always be. >> the physical training is one thing. obviously you spent hours and hours doing the physical training. the mental training, both in your sport, as well as probably in all the sports, how do you train yourself to have the mental strength that is necessary to get to that part, to be there on that stage? >> i think that as you grow up in the age of 5 years old, being in the spotlight, having expectations, sacrificing your
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life and knowing that you are your bottom line, and no one is going to -- no one's going to pull you through. and as you grow up into that, and then all of a sudden you're in the olympic spotlight you thrive under that pressure and you work for it. i love it. and you like life that means something. you like the highs to be to the ceiling and the lows to be absolutely devastating. but every day has intensity in part of it. and i think that's what i love so much about finance. it's got that same beat. >> you had to make a decision where you said look i've made my money as a skater, right? >> mm-hmm. >> and i'm now going to decide college, career. why business? why columbia? and what the goal? what's the end game now? >> i toured and competed for 15 years. and i was on the road eight months a year and i could never go to school. and a year ago i moved to new york, and i wanted to go to columbia. and this last year was crazy. i would go to school during the week, tour on the weekends, take the red eye back sunday, walk
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into class like this. but i also love finance. and i followed gold since i was 16. >> gold as a commodity. >> yeah, yes. and then as i have learned more and watched, you know, the crash in '08 and then seeing sideways markets for the last few years it's really sparked a lot of different interests in how to invest, and what the future holds. and the best way to navigate through these markets. and having earned most of my income already and not knowing what my next career's going to be i have to invest as if i'm retired. and that's why, you know, i've taken a liking to dividend pay stocks with low betas that really have provided good returns. and i really feel that going into the next ten years will, i'm not going to say they're going to outperform but i think they're a safer bet and i'm not in the mood for too much risk. >> now sasha mentions dividend paying stocks. she mentioned that, and i must tell you she came out to headquarters a couple weeks ago and i had done a segment that
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day on how the dividend trade may be overcrowded. >> don't tell me she changed your mind. >> a lot of people come out and a lot of people have strong opinions and those wall street strategists, they never back it up with anything. she's backed it up. you mention the dividend paying stocks. why specifically that in -- we know that almost every firm is recommending them. you had a great point in why you think high income producing securities are still a place where you want to be. >> you mention that they might be the next bubble. but if you really look at the fundamentals of these companies they don't have inflated p/es like during the tech bubble. and if you look at -- if you got a diversified and uncorrelated kind of string of positions and you get into certain sectors that aren't cyclical like johnson & johnson, p&g, kraft, these are companies that are not going to go out of business, that people are still going to buy during a recession. they have a lot of cash on hand. and they've outperformed, you know, in the last six months.
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i feel very strongly, you can't pick one stock. you have to be across sectors. and i personally have things like at&t, verizon, altria, kraft, and also across health care like kimberly-clark, and eli, but i also love mortgage reits and i know they're a little bit more risky but i feel like there's a position for, you know, small parts of your portfolio. like amtg has been a huge performer this year. and paid out a really handsome dividend. i think close to 15%. >> just curious, you know, everybody ease talking gabby douglas and of course we'll see her tonight on the uneven bars. 16 years old. at the beginning of what we hope, obviously for her sake, will be a lot of money making and deals. best advice to someone like that? are there lessons you had to learn the hard way? >> love this moment. because this is -- this is the beginning of her life. and it will open so many doors to do whatever she wants to do, she will be a hero and a role model for so many young girls coming up.
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and you know when i was coming out of the olympics, i loved giving public speeches and just being a role model and embracing everything that is and then using that to grow and develop your other interests. because there's the rest of her life ahead of her. and she has the ethic and the determination to accomplish and i'm sure there will be a lot of wonderful things ahead for her. >> you know the competitives who had to face sasha on the ice knew she was a tough competitor. you don't want to be on the other side of the trade with this young lady because she knows her stuff, carl, and she's got exceptionally good insight for a second-year business student. >> cohen capital management. i can see it now. >> i'm going to give you my resume. >> thank you. >> thank you for coming. >> thank you so much. glad to be here. >> keep those tweets coming by the way. best buy founder richard schulze wants his company back. brings us to our squawk on the tweet question. what does schulze see in the company that shoppers and short
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sellers do not? tweet us @cnbcsquawkst. we'll get some answers in a moment.
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squawk on the tweet on this monday morning. best buy founder richard schulze
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wants his company back, offering to take it private. what does he see in the company that shoppers and short sellers do not? he might finally get a tv at a price less than amazons with his owner discount versus employee discount. benjamin writes the founder sees a way to monetize people using the store as amazon's show room. and ernest tweets he wants to buy it back and bury it. after all it's his creation. a lot of skepticism today which we have not talked about with you. would you -- too risky? >> never buy a stock based on a takeover. history says it's a mistake. real quick, carl, i'll be back here on wednesday. big show. the head of the enforcement division at the s.e.c. and the asset management industry will be joining us. so many questions, knight capital brings up a lot of them. we'll get all these answers on wednesday. >> meantime, s&p is a point and a half away from 1400. do you trust these levels on a broad, broad basis? >> you know, we're going toe